India preps $5 billion two-fab plan

The Indian government has announced renewed efforts to try and create a chip manufacturing industry on the sub-continent and is looking for investment of about $5 billion to build two wafer fabs.

The exact level of government support for the plan would be finalized by way of negotiations with interested parties. This is set to happen after a report has been produced by the newly-formed Empowered Committee for identifying technology and investors for Semiconductor Wafer Fabrication (Fab) Manufacturing Facilities, the Indian government said in a statement.

The Empowered Committee is composed mainly of political appointments but is expected to co-opt industry experts and is due to report back to government by July 31, 2011.

The committee has been chartered with identifying the sources of technology and potential investors for the establishment of at least two wafer fabs and to recommend the nature and size of government support. This could be in the form of an equity position, grants and financial support.

The Indian government argues in its statement that the lack of domestic chip making and reliance on chips made overseas is serving as a bottleneck on the development of complete electronic systems within India. The argument continues that the creation of wafer fabs would have a "catalytic impact on the development downstream and upstream products." The government estimates that the creation of a chipmaking industry within India will help create 30 million direct and indirect jobs by 2020.

However, India has been here before and failed to attract any chip manufacturers to set up shop. In the middle part of the last decade a group of Silicon Valley based Indian ex-patriates created Semindia before transforming that company into a supplier of communications equipment. Hindustan Semiconductor Manufacturing Corp., selected Infineon Technologies AG as a partner to help it put down two fabs in Fab City industrial park near Hyderabad in the state of Andhra Pradesh.

Neither SemIndia nor HSMC has put down wafer fabs and the government-backed Fab City has drifted towards a focus on solar energy. It was not discussed whether Fab City would still be a preferred location for the creation of chip manufacturing under the renewed plan.

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